GBP/USD holds 1.2200 support, awaits BoE Gov. Carney's testimony

The greenback extended its recent upward trajectory on Tuesday, with the overall US Dollar Index hovering around a new eight-month high amid growing expectations that the Federal Reserve will raise interest rates in December. The GBP/USD pair reversed part of Monday's tepid recovery gains and is now heading back towards 1.2200 handle, while the EUR/USD major was seen consolidating near multi-month lows below 1.0900 handle.

On Monday, the GBP/USD major staged a tepid recovery bounce from a short-term ascending trend-channel. The recovery, however, lacked momentum and the pair remained near multi-decade lows as concerns of 'hard Brexit' continued undermining the British Pound. Meanwhile, stronger-than-expected prints for the flash version of Euro-zone PMIs for October extended some support for the shared currency, thus limiting losses for the EUR/USD pair.

Today's economic docket features the release of German Ifo business climate index during European session, while from the US the release of Conference Board's consumer confidence will be in focus during NA session. Later during the day, speeches from two of the most influential central banks head will grab the spotlight and would be the most important market moving events on Tuesday. BoE Governor Mark Carney will testify about the economic consequences of the historic Brexit Vote before the House of Lords Economic Affairs Committee, while ECB President Mario Draghi is scheduled to speak on monetary policy and should trigger a fresh bout of volatility in the FX market.

Technical outlook

GBP/USD

The pair has been consolidating near a short-term ascending trend-channel support and now seems to face difficulty in moving above 20-SMA (4-hourly). The 20-SMA, currently near 1.2230-35 region, now seems to act as immediate hurdle and is closely followed by resistance near 1.2250 (yesterday’s high). A convincing strength above 1.2250 level is likely to boost the pair immediately towards 1.2300 handle before the pair makes an attempt to clear 1.2330 resistance and head towards testing the ascending trend-channel resistance near 1.2375-80 region.

On the flip side, the ascending channel support near 1.2200 handle might continue to protect immediate downside, which if broken decisively would accelerate the slide initially towards 1.2170 horizontal support and the slide could further get extended towards 1.2135-30 support. A follow through selling pressure below 1.2135-30 has the potential to drag the pair below 1.2100-1.2090 support towards retesting flash-crash swing lows support near 1.2000 psychological mark.

EUR/USD

Despite of short-term oversold conditions (RSI below 30), the pair's tepid recovery attempt got sold into near 1.0900 handle and the pair remained within striking distance of a seven-month lows around 1.0860 region. This 1.0860 level is likely to act as immediate support below which the downslide seems to drag the pair immediately towards 1.0810 support area. A follow through selling pressure below 1.0810-1.0800 strong horizontal support would turn the pair vulnerable to extend its depreciating move in the near-term.

Conversely, sustained recovery momentum above 1.0900 handle seems to trigger a bout of short-covering that should boost the pair immediately towards 1.0950-60 important support break-point turned strong resistance. Recovery momentum above the said resistance could lift the pair beyond 1.1000 psychological mark but any further recovery now seems to be restricted near 1.1050 strong horizontal resistance.